SEATTLE - Renters in King, Snohomish and Pierce counties are spending 31.6 percent of monthly gross income on rent, which is the highest it’s ever been, according to Zillow.com estimates.
At the same time, homeowners in the area are paying only 22.7 percent of monthly gross income on mortgage.The numbers indicate it may be cheaper to own than to rent, which is a change from the pattern from 1985 to 2000. Zillow data from those years show people used to spend 25.7 percent of monthly gross income on mortgage, while renters spent 23.2 percent of monthly gross income on rent.
The CEO of Realogics Sothebys International, Dean Jones, said many current renters have no idea that they’re prime candidates for home ownership.Jones said the cost of renting is not just the money being turned in to a landlord every month, but the lost opportunity to buy a home before prices potentially soar higher.
“If they have strong job security, they think they’ll be in Seattle for a couple of years, they should definitely check in with a loan officer and see what they’re purchasing power might be,” Jones said.
In a market where demand far outpaces supply, Jones said it will take several years for there to be more units built or put on the market.Until then, prices will keep climbing.
He said there are some private lenders now offering cash for up to 75 percent of the home value and promises to close within a week. That means the buyer puts down 25 percent but can still be competitive against bidders coming in with all cash. This “same-as-cash” loan requires that the buyer then refinances within six to eight weeks.
Jones said the Internal Revenue Service is also allowing each parent of a buyer to pay $14,000 toward the down payment of a child’s house without any tax consequences.
Cassie Daughtrey, a broker, was involved in three to four sales in the last month that went to buyers who had previously been renting.Daughtrey said, “In Green Lake, a big house can rent for sometimes over $5,000 a month. If that’s what you’re paying in rent, you can buy a house. I know you can.”
More affordable options lie just outside Seattle. But people like Zoe De Mar still don’t believe they can purchase.De Mar said she has bad credit. Meanwhile, her rent eats up 30 to 35 percent of her income each month.
When a new tenant replaces a former one in her building, she said the rent “increases a couple hundred dollars, which is huge, compared to what I was paying when I first moved in eight years ago.” De Mar said everything, whether rent or mortgage, seems expensive.
Zillow’s chief economist, Svenja Gudell, said she expects mortgages will creep up as well. “Mortgage rates are rising, and at some point we will be spending much more than we have historically on a mortgage payment, and that’s going to become tricky,” she said.